Anyone who reads a newspaper, speaks with their family or associates or has tuned into mainstream financial television over the past 3 years is acutely aware that “things” are not right.
So, in a financial sense, what is it that really ails us?
The usual suspects folks routinely hear runs the gamut from burgeoning health care costs to profligate government spending/deficits to credit default swaps to high frequency trading to claims that interest rates were left too low for too long. Then there’s the “China card”. Who hasn’t heard the rhetoric about trade imbalances being the fault of the Chinese and their reluctance to allow their currency to ‘strengthen’ against its U.S. counterpart?
All these issues are valid and worthy of healthy public debate. None of them explicitly deal with the root cause of our economic malaise, exactly because they are ALL symptoms of ‘the root of our real economic problem–THE MONEY, namely, irredeemable fiat money.
Issues That Confound
First… Defining Inflation
One should remember that “inflation” is and always has been a monetary event. In recent years, there has been a big movement on the part of Central Bankers and monetary elites to “de-emphasize” the importance of the M’s–or the monetary aggregates [M1, M2 and the discontinuance of reporting of M3]. Interestingly [or perhaps we might better say, conveniently], the privately reconstituted ‘plunging’ M3 aggregate is often cited in the mainstream press in foolish attempts to de-emphasize the importance or relevance of money creation in the creation of inflationary pressures:
compliments: www.shadowstats.com
The ‘totes’ who exclusively serve this plunging M3 kool-aid are always remiss to explain or deal with a more fundamental image than the M3 decline depicts; namely, the even steeper rise in the monetary base [MZM]:
compliments: St. Louis Fed
So let’s just say that using graphs depicting monetary aggregates–there are two sides to the coin–one showing a collapse, the other showing a vertical increase. The contradictory extremes of these two monetary aggregates, some might argue, are highly suggestive that they are both “engineered” and not the product of ‘free market’ forces.
Spiraling costs tend to be highly indicative that too much money is being created–a symptom that newly created money is stoking the furnace of inflation. Interestingly, we receive regular bleats from the mainstream financial press regarding increasing costs of healthcare but the big picture narrative remains contradictory; one of deflation being the biggest threat to our economy? This contradiction is suggestive that there is something wrong with the manner in which inflation is being measured and reported.
Profligacy in government finances and the extent to which the U.S. Government has ‘borrowed” money or ‘monetized’ [bought] their own debt–given current U.S. Government bond yields–overwhelmingly indicative that the interest rate [usury] mechanism is not only seriously impaired–it’s completely broken.
Credit default swaps [derivatives] and their proliferation measures in the hundreds of TRILLIONS. The U.S. Government’s own accounting tells us there are virtually NO LEGITIMATE END USERS FOR ANY OF THEM. Why would anyone engage in such pursuits if demonstrably they COULD NOT GAIN [profit] from legitimate customers or end users? This is a ‘slam dunk’ that nefarious activity is occurring:
compliments: Comptroller of the Currency, Quarterly Derivatives Fact Sheet
High frequency trading [HFT] by its very definition and according to its inventors/originators has nothing to do with price discovery. As such, HFT amounts to a massive “skimming operation”. Skimming operations are manipulative, period. We should all be asking why virtually every strategically important market [equities, interest rates, currency, precious metals, energy] has adopted a HFT model–of one form or another–in recent years.
The question of whether interest rates were left “too low” for “too long” is ‘laughable’ and misdirection at its best. The real questions are, “Why interest rates are where they are?”, and “Why hasn’t the bond market spotted the ruse?” The answers to these questions are conceptually shrouded in the notion that “Usury” has been “Neutered”. The bond market has been commandeered by agents of the Federal Reserve via the Interest Rate Swap complex and interest rate levels are now arbitrary set:
compliments: Comptroller of the Currency, Quarterly Derivatives Fact Sheet
Understand folks, 5 banks [J.P. Morgan, Citibank, Goldman, B of A and Morgan Stanley] make up 96% of ALL reported derivative trade depicted above–trade that involves and highly influences interest rates, measured in the hundred of TRILLIONS and empirically has no visible end-users. These would be the same institutions that were effectively rescued by the Banker Bailouts. Do any of you think there might be an “invisible” and “undeclared” end user–like the Fed?
I would be remiss if I did not mention gold. Put simply, a rapidly or continuously rising price of gold is but another “symptom” of monetary debasement, where people vote with their wallets, period. This is why its price rise is stymied at every point along the way.
The China card is pretty much “the bottom of the barrel”. When there are no believable “symptoms” left in the blame game, a foreign bogey man is required to ‘hold the bag’.
The Real Culprit
The real reason why the issues outlined above [and others] have been so widely reported in the mainstream financial press is really quite simple: irredeemable fiat money systems are inherently unstable and by their own design, they are guaranteed to fail. This fact is the “third rail” in our present financial system. Real discussion and debate has effectively been banned from not only the complicit/owned mainstream press but also, speaking from first hand experience, the cloistered confines of academia where Keynesian ‘clap-trap’ is fomented.
Never in the history of mankind have so many, being told so much, know so little about something so integral to their existence.
Our irredeemable fiat money system is failing.
Today’s Market
Overseas equity markets fell on Thursday with Japan’s Nikkei Index losing 190 points to 9,369. North American markets also stumbled with the DOW giving up 47.2 to 10,788, the NASDAQ losing 7.94 to 2,368.62 and the S & P off by 3.55 points to 1,141.2. NYMEX crude oil futures added 1.98 to end the day at 79.94 per barrel.
Benchmark interest rates, the 5 yr. government bonds was last seen at 1.28% while the 10 yr. bond was last at 2.52%.
On foreign exchange markets the U.S. Dollar Index added .05 to 78.82.
The precious metals complex was lower across the board with COMEX gold futures falling 1.90 to 1,309.00 per ounce while COMEX silver futures gave up .14 to 21.78 per ounce. The XAU Index fell 1.98 to 196.96 while the HUI Index dropped 4.06 to 509.88.
On tap for tomorrow, at 8:30 a.m. Aug. Personal Income data is due, expected +.3% vs. prior +.2%. Also at 8:30 a.m. Aug. Personal Spending data is due, expected +.3% vs. prior +.4%. Additionally at 8:30 a.m. PCI Core Price data is due, expected +.1% vs. prior +.1%. At 9:55 a.m. Sept. Univ. of Michigan Consumer Confidence data is due expected 67.0 vs. prior 66.6. At 10:00 a.m. Aug. Construction Spending data is due, expected -.7% vs. prior –1.0%. Also at 10:00 a.m. Sept ISM data is due expected 55.0 vs. prior 56.3. At 2:00 p.m. Sept. Auto Sales data is due, last reported 3.7M and also at 2:00 p.m. Sept. Truck Sales data is due, last reported 4.96M.
Wishing you all a pleasant evening!
